N-CSR 1 tffcformncsr.txt TAX-FREE FUND OF COLORADO 6/30/03 SEMI-ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5047 Tax-Free Fund of Colorado (Exact name of Registrant as specified in charter) 380 Madison Avenue New York, New York 10017 (Address of principal executive offices) (Zip code) Joseph P. DiMaggio 380 Madison Avenue New York, New York 10017 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 697-6666 Date of fiscal year end: 12/31 Date of reporting period: 6/30/03 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. TAX-FREE FUND OF COLORADO Semi-Annual Report June 30, 2003 [Logo of the Aquila Group of Funds: an eagle's head] AQUILA(SM) GROUP OF FUNDS SERVING COLORADO INVESTORS FOR OVER 15 YEARS TAX-FREE FUND OF COLORADO ----------- 380 MADISON AVENUE, SUITE 2300 * NEW YORK, NY 10017 800-437-1020 * 212-697-6666 [Logo of Tax-Free Fund of Colorado: a square with silhouettes of two mountains and a rising sun] SEMI-ANNUAL REPORT TAX-FREE FUND OF COLORADO STATEMENT OF INVESTMENTS JUNE 30, 2003 (UNAUDITED)
RATING FACE MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (36.2%) S&P VALUE ------------ ------------------------------------------------------------- -------- ------------- CITY & COUNTY (2.3%) ------------------------------------------------------------- Denver Colorado City & County Excise Tax Revenue $ 2,260,000 5.00%, 09/01/12 FSA Insured .............................. Aaa/AAA $ 2,536,850 1,000,000 5.00%, 09/01/11 FSA Insured .............................. Aaa/AAA 1,133,750 Denver Colorado City and County Art Museum 2,000,000 5.00%, 08/01/15 .......................................... Aa1/AA+ 2,217,500 ------------- 5,888,100 ------------- METROPOLITAN DISTRICT (6.9%) ------------------------------------------------------------- Castle Pines Metropolitan District 1,060,000 5.50%, 12/01/07 FSA Insured .............................. Aaa/AAA 1,216,350 Foothills Park & Recreational District 1,310,000 5.00%, 12/01/12 FSA Insured .............................. Aaa/NR 1,485,213 1,325,000 5.00%, 12/01/13 FSA Insured .............................. Aaa/NR 1,488,969 1,850,000 5.00%, 12/01/17 MBIA Insured ............................. Aaa/NR 2,021,125 Highlands Ranch Metropolitan District #1, Refunding 1,530,000 6.25%, 09/01/06 MBIA Insured ............................. Aaa/AAA 1,541,919 1,000,000 5.75%, 09/01/08 AMBAC Insured ............................ Aaa/AAA 1,167,500 1,730,000 5.75%, 09/01/09 AMBAC Insured ............................ Aaa/AAA 2,047,888 Highlands Ranch Metropolitan District #4 1,000,000 5.80%, 12/01/07 LOC: Swiss Bank, Pre-Refunded ............ NR/NR** 1,116,250 Interstate South Metropolitan District 2,165,000 5.75%, 12/01/09 LOC: US Bank ............................. NR/AA- 2,300,313 South Suburban Park & Recreational District 1,365,000 5.125%, 12/15/09 FGIC Insured ............................ Aaa/AAA 1,545,863 Westglenn Metropolitan District Colorado 1,000,000 6.25%, 12/01/08 Pre-Refunded ............................. NR/A+ 1,048,430 Westglenn Metropolitan District Colorado Jefferson County Refunding 660,000 5.65%, 12/01/04 ETM ...................................... NR/A+ 674,421 ------------- 17,654,241 ------------- SCHOOL DISTRICTS (27.0%) ------------------------------------------------------------- Adams & Arapahoe County School District 28J 4,000,000 5.00%, 12/01/16 FSA Insured .............................. Aaa/AAA 4,440,000 Adams County School District #12 1,255,000 5.625%, 12/15/08 FGIC Insured ............................ Aaa/AAA 1,465,212 2,000,000 5.00%, 12/15/12 MBIA Insured ............................. Aaa/AAA 2,267,500 Adams County School District #14 1,275,000 5.75%, 12/01/08 FSA Insured .............................. Aaa/AAA 1,493,344 Arapahoe County Cherry Creek School District #5 $ 1,000,000 5.50%, 12/15/08 .......................................... Aa1/AA $ 1,166,250 2,760,000 5.50%, 12/15/11 .......................................... Aa1/AA 3,163,650 2,750,000 5.50%, 12/15/12 .......................................... Aa1/AA 3,145,312 Boulder Valley Colorado School District 1,215,000 5.50%, 12/01/08 FGIC Insured ............................. Aaa/AAA 1,391,175 Clear Creek Colorado School District 1,000,000 5.00%, 12/01/16 FSA Insured .............................. Aaa/AAA 1,101,250 Denver City & County School District #1 1,000,000 5.60%, 06/01/08 .......................................... Aa3/AA- 1,155,000 Douglas & Elbert Counties School District # Re-1, Series 1992 1,000,000 5.00%, 12/15/10 FGIC Insured ............................. Aaa/AAA 1,128,750 2,000,000 5.25%, 12/15/11 FGIC Insured ............................. Aaa/AAA 2,257,500 El Paso County Colorado School District #2 Harrison 1,000,000 5.00%, 12/01/15, MBIA Insured ............................ Aaa/NR 1,115,000 El Paso County School District #11 1,330,000 6.25%, 12/01/08 .......................................... Aa3/AA- 1,600,988 El Paso County School District #20 1,000,000 6.15%, 12/15/08 MBIA Insured ............................. Aaa/AAA 1,196,250 1,500,000 5.00%, 12/15/14 FGIC Insured ............................. Aaa/NR 1,689,375 El Paso County School District #38 1,110,000 5.70%, 12/01/12 .......................................... Aa3/NR 1,329,225 El Paso County School District #49 1,500,000 5.50%, 12/01/13 FSA Insured .............................. Aaa/AAA 1,794,375 1,000,000 5.25%, 12/01/14 FGIC Insured ............................. Aaa/AAA 1,142,500 1,795,000 5.00%, 12/01/15 FSA Insured .............................. Aaa/AAA 2,019,375 Garfield County Colorado School District 1,250,000 5.00%, 12/01/17 FSA Insured .............................. Aaa/NR 1,365,625 Jefferson County School District # R-1 3,000,000 5.50%, 12/15/09 FGIC Insured ............................. Aaa/AAA 3,536,250 2,340,000 5.25%, 12/15/11 FGIC Insured ............................. Aaa/AAA 2,644,200 1,000,000 5.50%, 12/15/13 FGIC Insured ............................. Aaa/AAA 1,178,750 2,500,000 4.00%, 12/15/14 FSA Insured .............................. Aaa/AAA 2,637,500 La Plata County Colorado School District #9 1,500,000 5.00%, 11/01/18 MBIA Insured ............................. Aaa/NR 1,623,750 Larimer County School District $ 2,100,000 5.25%, 12/15/11 .......................................... Aa3/AA- $ 2,344,125 Larimer Weld and Boulder County Thompson S.D. 2,000,000 5.90%, 12/15/05 .......................................... A1/AA- 2,135,000 Mesa County School District #51 1,065,000 6.00%, 12/01/06 MBIA Insured ............................. Aaa/AAA 1,218,094 1,000,000 5.20%, 12/01/09 MBIA Insured ............................. Aaa/AAA 1,126,250 Pueblo County Colorado School District # 70 1,040,000 5.50%, 12/01/09 AMBAC Insured ............................ Aaa/AAA 1,188,200 1,000,000 5.00%, 12/01/15 FGIC Insured ............................. Aaa/AAA 1,105,000 3,440,000 5.00%, 12/01/16 FGIC Insured ............................. Aaa/AAA 3,758,200 Weld & Adams County School District 3J 1,000,000 5.50%, 12/15/10 AMBAC Insured, Pre-Refunded .............. Aaa/AAA 1,181,250 Weld County Colorado School District # 2 1,315,000 5.00%, 12/01/15 FSA Insured .............................. Aaa/AAA 1,466,225 Weld County Colorado School District # 6 1,195,000 5.00%, 12/01/15 FSA Insured .............................. Aaa/AAA 1,320,475 Weld County Colorado School District # 8 1,115,000 5.00%, 12/01/15 FSA Insured .............................. Aaa/AAA 1,243,225 1,385,000 5.25%, 12/01/17 FSA Insured .............................. Aaa/AAA 1,556,394 ------------- 68,690,544 ------------- Total General Obligation Bonds ........................ 92,232,885 ------------- REVENUE BONDS (63.8%) ------------------------------------------------------------- ELECTRIC (2.3%) ------------------------------------------------------------- Colorado Springs Utilities Revenue 1,660,000 5.00%, 11/15/17 .......................................... Aa2/AA 1,815,625 Moffat County Colorado Pollution Control 2,125,000 5.625%, 11/01/06 AMBAC Insured ........................... Aaa/AAA 2,398,594 Platte River Power Authority 1,500,000 6.00%, 06/01/07 MBIA Insured ............................. Aaa/AAA 1,728,750 ------------- 5,942,969 ------------- HIGHER EDUCATION (10.1%) ------------------------------------------------------------- Boulder County Colorado UCAR Revenue 1,760,000 5.00%, 09/01/16 MBIA Insured ............................. Aaa/AAA 1,933,800 City of Aurora Colorado Educational Development Refunding Bonds Series 1994 $ 1,580,000 6.00%, 10/15/07 .......................................... NR/BBB $ 1,662,950 Colorado Educational & Cultural Facility Authority 2,110,000 5.00%, 07/01/17 AMBAC Insured ............................ Aaa/AAA 2,297,262 Colorado Educational & Cultural Facility Authority Johnson & Wales 860,000 5.00%, 04/01/18 XLCI Insured ............................. Aaa/AAA 915,900 Colorado Educational and Cultural Facilities Authorities 1,865,000 5.375%, 07/01/18 AMBAC Insured ........................... Aaa/AAA 2,102,787 Colorado Post Secondary Educational Facility 1,170,000 5.50%, 03/01/08 MBIA Insured ............................. Aaa/AAA 1,336,725 Colorado Post Secondary Educational Facility Authority Refunding Series 93 1,000,000 5.95%, 03/01/09 AMBAC Insured ............................ A2/AAA 1,013,410 Colorado State Board of Agriculture Revenue, University of Southern Colorado Auxiliary Facility 1,000,000 6.25%, 08/01/07 AMBAC Insured ............................ Aaa/AAA 1,003,370 Colorado State University System 1,530,000 5.00%, 03/01/17 AMBAC Insured ............................ Aaa/NR 1,675,350 University of Colorado Enterprise System 1,000,000 5.00%, 06/01/11 .......................................... Aa3/AA- 1,140,000 2,325,000 5.00%, 06/01/15 AMBAC Insured ............................ Aaa/AAA 2,580,750 1,735,000 5.00%, 06/01/16 .......................................... Aa3/AA- 1,915,006 1,000,000 5.25%, 06/01/17 FGIC Insured ............................. Aaa/AAA 1,125,000 University of Northern Colorado Auxiliary Facilities 1,500,000 5.75%, 06/01/07 MBIA Insured, Pre-Refunded ............... Aaa/AAA 1,581,435 1,745,000 5.75%, 06/01/08 MBIA Insured ............................. Aaa/AAA 2,013,294 1,390,000 5.00%, 06/01/15 AMBAC Insured ............................ Aaa/AAA 1,527,262 ------------- 25,824,301 ------------- HOSPITAL (5.2%) ------------------------------------------------------------- Colorado Health Facility Authority Hospital Revenue, Catholic Health 1,000,000 5.375%, 12/01/09 ......................... Aa2/AA 1,108,750 Colorado Health Facility Authority Hospital Revenue North Colorado Medical Center 2,030,000 5.60%, 05/15/05 MBIA Insured ............................. Aaa/AAA 2,078,212 Colorado Health Facilities Authority Revenue, Refunding (Boulder Community Hospital) $ 1,410,000 5.65%, 10/01/06 MBIA Insured ............................. Aaa/AAA $ 1,506,937 Colorado Health Facility Authority Hospital Revenue, Sisters of Charity-Leavenworth 1,000,000 5.50%, 12/01/08 MBIA Insured ............................. Aaa/AAA 1,148,750 1,500,000 5.25%, 12/01/10 MBIA Insured ............................. Aaa/AAA 1,676,250 Colorado Health Facility Authority Sisters of Charity Health Care 1,000,000 6.25%, 05/15/09 AMBAC Insured, ETM ....................... Aaa/AAA 1,196,250 Colorado Health Facility Community Provider Pooled Loan Revenue 313,000 7.20%, 07/15/05 FSA Insured .............................. Aaa/AAA 314,042 Colorado Springs Hospital Revenue 1,460,000 5.50%, 12/15/06 MBIA Insured ............................. Aaa/AAA 1,620,600 Poudre Valley Hospital District, Refunding 1,000,000 5.375%, 11/15/07 ......................................... Aa/NR 1,012,120 University Colorado Hospital Authority Hospital Revenue 1,475,000 5.50%, 11/15/07 AMBAC Insured ............................ Aaa/NR 1,685,187 ------------- 13,347,098 ------------- HOUSING (3.7%) ------------------------------------------------------------- Adams County Colorado Multi-Family Housing Revenue, Brittany Station Series A 1,600,000 5.40%, 09/01/25 FNMA Insured ............................. NR/AAA 1,704,000 Colorado Housing Finance Authority 960,000 5.00%, 08/01/13 Series 2001 .............................. A1/A+ 1,002,000 1,850,000 6.05%, 10/01/16 Series 1999A3 ............................ Aa2/AA+ 1,944,812 60,000 6.125%, 11/01/23 Series 1998D3 ........................... Aa2/NR 64,950 Colorado Housing Finance Authority, SFM 20,000 6.00%, 12/01/04 Series 1994C ............................. Aa2/NR 20,254 445,000 5.625%, 06/01/10 Series 1995D ............................ Aa2/NR 449,049 190,000 5.75%, 11/01/10 Series 1996A ............................. Aa2/A+ 193,040 185,000 6.25%, 12/01/12 Series 1994C ............................. Aa2/NR 185,590 Colorado Housing Finance Authority, Single Family Program 2000C3 $ 375,000 5.70%, 10/01/22 .......................................... Aa2/AA $ 398,437 Colorado Housing Finance Authority, Single Family Program Sub. 2000D 610,000 5.40%, 10/01/12 .......................................... A1/A+ 643,550 Denver Colorado Single Family Mortgage Revenue 490,000 5.00%, 11/01/15 GNMA Insured ............................. NR/AAA 517,563 Littleton Assisted Living Building Authority, Amity Plaza Project Multi-Family Housing Revenue Bond Series 1994 640,000 6.10%, 03/01/06 .......................................... NR/A+ 658,400 Snowmass Village Multi-Family Revenue Refunding 1,500,000 6.30%, 12/15/08 FSA Insured .............................. Aaa/AAA 1,533,750 ------------- 9,315,395 ------------- LEASE (6.5%) ------------------------------------------------------------- Aurora Colorado COP 2,105,000 5.25%, 12/01/13 AMBAC Insured ............................ Aaa/AAA 2,381,281 Broomfield Colorado COP 2,500,000 5.10%, 12/01/12 AMBAC Insured ............................ Aaa/NR 2,815,625 Denver Colorado City and County COP Roslyn Fire 1,835,000 5.00%, 12/01/15 .......................................... Aa2/AA 2,032,263 El Paso County COP 1,100,000 5.25%, 12/01/09 MBIA Insured ............................. Aaa/AAA 1,277,375 El Paso County COP Pikes Peak Regional Dev. Auth. 1,925,000 5.00%, 12/01/18 AMBAC Insured ............................ Aaa/AAA 2,091,031 El Paso County Colorado COP Judicial Building 1,760,000 5.00%, 12/01/16 AMBAC Insured ............................ Aaa/AAA 1,938,200 Lakewood Colorado COP 1,440,000 5.20%, 12/01/13 AMBAC Insured ............................ Aaa/AAA 1,621,800 Northern Colorado Water Conservancy District 1,000,000 5.00%, 10/01/15 MBIA Insured ............................. Aaa/AAA 1,113,750 Westminster, Colorado COP 1,055,000 5.35%, 09/01/11 MBIA Insured ............................. Aaa/AAA 1,200,063 ------------- 16,471,388 ------------- SALES TAX (11.2%) ------------------------------------------------------------- City of Boulder Colorado $ 1,045,000 5.25%, 08/15/10 AMBAC Insured ............................ Aaa/AAA $ 1,191,300 Boulder Colorado Open Space Acquisition 1,250,000 5.50%, 08/15/12 .......................................... Aa1/AA+ 1,435,937 Boulder County Colorado Open Space Capital Improvement 3,065,000 5.00%, 07/15/16 MBIA Insured ............................. Aaa/AAA 3,367,669 Boulder County Colorado Open Space & Use Tax Revenue Bonds Series 1994 1,740,000 5.75%, 12/15/04, FGIC Insured ............................ Aaa/AAA 1,855,275 Boulder County Colorado Sales & Use Tax Open Space Series A 1,000,000 5.45%, 12/15/12 FGIC Insured ............................. Aaa/AAA 1,140,000 Colorado Springs Colorado Sales & Use Tax Revenue Service Sales 1,320,000 5.00%, 12/01/12 .......................................... A1/AA 1,453,650 City & County of Denver Colorado Excise Tax Revenue 2,000,000 5.375%, 09/01/10 FSA Insured ............................. Aaa/AAA 2,300,000 Douglas County Colorado Sales & Use Tax Open Space Revenue 1,780,000 5.50%, 10/15/12 FSA Insured .............................. Aaa/AAA 2,047,000 Golden Colorado Sales & Use Tax 1,265,000 5.00%, 12/01/12 AMBAC Insured ............................ Aaa/AAA 1,434,194 Jefferson County Open Space Sales Tax 1,245,000 5.00%, 11/01/11 FGIC Insured ............................. Aaa/AAA 1,385,063 1,600,000 5.00%, 11/01/13 AMBAC Insured ............................ Aaa/AAA 1,796,000 1,080,000 5.00%, 11/01/14 AMBAC Insured ............................ Aaa/AAA 1,202,850 Lakewood Colorado Sales & Use Tax Revenue 1,040,000 5.25%, 12/01/09 .......................................... NR/AA 1,199,900 Larimer County Colorado Sales Tax Revenue Bond 1,000,000 5.50%, 12/15/12 AMBAC Insured ............................ Aaa/AAA 1,152,500 Longmont Colorado Sales & Use Tax 1,875,000 5.50%, 11/15/14 .......................................... NR/AA 2,160,938 Thornton Colorado Sales Tax $ 1,000,000 5.00%, 09/01/14 FSA Insured .............................. Aaa/AAA $ 1,111,250 Westminster Colorado Sales Tax Revenue 1,175,000 5.50%, 12/01/07 FGIC Insured ............................. Aaa/AAA 1,348,313 1,000,000 5.00%, 12/01/17 AMBAC Insured ............................ NR/AAA 1,092,500 ------------- 28,674,339 ------------ - TRANSPORTATION (5.2%) ------------------------------------------------------------- Arapahoe County Colorado E-470 Vehicle Registration Revenue Bonds 1,000,000 5.45%, 08/31/07 MBIA Insured Pre-Refunded ................ Aaa/AAA 1,117,500 Colorado Dept. of Transportation-Transportation Revenue Anticipation Note 1,000,000 6.00%, 06/15/13 AMBAC Insured, Pre-Refunded .............. Aaa/AAA 1,208,750 Colorado Department of Transportation Rev. 1,565,000 5.00%, 06/15/15 MBIA Insured ............................. Aaa/AAA 1,791,925 Northwest Pkwy. Pub. Hwy. Auth. Series A 2,515,000 5.15%, 06/15/14 AMBAC Insured ............................ Aaa/AAA 2,854,525 Regional Transportation District Colorado CTFS 1,190,000 5.00%, 06/01/15 AMBAC Insured ............................ Aaa/AAA 1,316,438 1,510,000 4.85%, 06/01/18 AMBAC Insured ............................ Aaa/AAA 1,613,813 Regional Transportation District Sales Tax Revenue 2,000,000 5.00%, 11/01/13 FGIC Insured ............................. Aaa/AAA 2,240,000 1,000,000 5.00%, 11/01/16 FGIC Insured ............................. Aaa/AAA 1,087,500 ------------- 13,230,451 ------------- WATER & SEWER (15.9%) ------------------------------------------------------------- Boulder Colorado Water & Sewer Revenue 1,000,000 5.40%, 12/01/14 .......................................... Aa2/AA+ 1,142,500 Broomfield Colorado Water Activity Enterprise 1,500,000 5.30%, 12/01/12 MBIA Insured ............................. Aaa/NR 1,721,250 1,730,000 5.25%, 12/01/13 MBIA Insured ............................. Aaa/NR 1,970,037 2,190,000 5.00%, 12/01/16 MBIA Insured ............................. Aaa/NR 2,411,737 2,290,000 5.00%, 12/01/17 MBIA Insured ............................. Aaa/NR 2,501,825 Broomfield Colorado Sewer and Waste Water Revenue 1,985,000 5.00%, 12/01/15 AMBAC Insured ............................ Aaa/NR 2,208,312 1,000,000 5.00%, 12/01/16 AMBAC Insured ............................ Aaa/NR 1,100,000 Centennial Water & Sewer District $ 1,750,000 5.80%, 12/01/07 FSA Insured .............................. Aaa/AAA $ 1,933,750 Colorado Clean Water Revenue 1,000,000 5.375%, 09/01/10 ......................................... Aaa/AAA 1,133,750 Colorado Water Res. & Power Development Authority 215,000 6.00%, 09/01/06 .......................................... Aaa/AAA 217,455 1,000,000 5.50%, 09/01/09 .......................................... Aaa/AAA 1,145,000 1,635,000 5.00%, 09/01/12 .......................................... Aaa/AAA 1,857,769 1,000,000 5.55%, 11/01/13 FGIC Insured ............................. Aaa/AAA 1,145,000 1,160,000 4.00%, 09/01/15 .......................................... Aaa/AAA 1,202,050 Denver Colorado City and County Wastewater 1,560,000 5.00%, 11/01/15 FGIC Insured ............................. Aaa/AAA 1,737,450 Denver Colorado City & County Water Board 2,570,000 4.75%, 12/01/17 FSA Insured .............................. Aaa/AAA 2,765,962 1,885,000 4.75%, 12/01/18 FSA Insured .............................. Aaa/AAA 2,009,881 Lafayette Colorado Water Revenue 1,625,000 5.00%, 12/01/17 MBIA Insured ............................. Aaa/AAA 1,787,500 Left Hand Water District, Series 1996 1,530,000 5.75%, 11/15/08 MBIA Insured ............................. Aaa/AAA 1,717,425 Metro Wastewater Reclamation District 1,270,000 5.25%, 04/01/09 .......................................... Aa2/AA 1,425,575 Northglenn Colorado Water & Sewer 1,010,000 5.75%, 12/01/06 FSA Insured .............................. Aaa/AAA 1,147,613 Pueblo Colorado Board Water Works 1,000,000 5.50%, 11/01/10 FSA Insured .............................. Aaa/AAA 1,177,500 Thornton, Colorado, Refunding 2,000,000 5.60%, 12/01/06 FSA Insured .............................. Aaa/AAA 2,262,500 Westminster Colorado Water & Wastewater Utility Revenue 1,000,000 5.70%, 12/01/04 AMBAC Insured ............................ Aaa/AAA 1,063,750 Ute Water Conservancy District 1,570,000 5.50, 6/15/12 MBIA Insured ............................... Aaa/AAA 1,795,688 ------------- 40,581,279 ------------- MISCELLANEOUS REVENUE (3.7%) ------------------------------------------------------------- Denver Colorado City & County Helen Bonfils Project $ 2,275,000 5.875%, 12/01/09 ......................................... NR/AA- $ 2,596,344 Denver Colorado Convention Center Hotel 3,000,000 4.00%, 12/01/14 XLCI Insured ............................. Aaa/AAA 3,112,500 South Suburban Park & Recreational District 1,000,000 6.00%, 11/01/07 .......................................... Baa3/NR 1,126,250 Thornton, Colorado Development Authority 1,230,000 5.75%, 12/01/06 MBIA Insured ............................. Aaa/AAA 1,397,587 Westminster, Colorado Golf Course Activity 1,000,000 5.40%, 12/01/13 Asset Guaranty Insured ................... NR/AA 1,091,250 ------------- 9,323,931 ------------- Total Revenue Bonds ................................... 162,711,151 ------------- Total Investments (cost $234,675,116*) ...................... 100.0% 254,944,036 Other assets less liabilities ............................... 0.0 102,116 ----- ------------- Net Assets .................................................. 100.0% $ 255,046,152 ===== =============
* See note 4. ** Any security not rated has been determined by the Investment Sub-Adviser to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a rating service. PORTFOLIO ABBREVIATIONS: ----------------------------------------------- AMBAC - American Municipal Bond Assurance Corp. COP - Certificates of Participation ETM - Escrowed to Maturity FGIC - Financial Guaranty Insurance Co. FNMA - Federal Housing Administration FSA - Financial Security Assurance GNMA - Government National Mortgage Association LOC - Letter of Credit MBIA - Municipal Bond Investors Assurance Corp. SFM - Single Family Mortgage XLCI - XL Capital Assurance Inc. See accompanying notes to financial statements. TAX-FREE FUND OF COLORADO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) ASSETS Investments at value (cost $234,675,116) ................................................. $ 254,944,036 Interest receivable ...................................................................... 1,744,934 Receivable for Fund shares sold .......................................................... 690,213 Receivable for investment securities sold ................................................ 197,427 Other assets ............................................................................. 10,525 ------------- Total assets ............................................................................. 257,587,135 ------------- LIABILITIES Cash overdraft ........................................................................... 1,943,879 Payable for Fund shares redeemed ......................................................... 173,375 Dividends payable ........................................................................ 242,606 Management fee payable ................................................................... 104,887 Distribution fees payable ................................................................ 46,284 Accrued expenses ......................................................................... 29,952 ------------- Total liabilities ........................................................................ 2,540,983 ------------- NET ASSETS ..................................................................................... $ 255,046,152 ============= Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $.01 per share ....... $ 232,069 Additional paid-in capital ............................................................... 234,730,283 Net unrealized appreciation on investments (note 4) ...................................... 20,268,920 Accumulated net realized gain on investments ............................................. 59,814 Distributions in excess of net investment income ......................................... (244,934) ------------- $ 255,046,152 ============= CLASS A Net Assets ............................................................................... $ 231,211,343 ============= Capital shares outstanding ............................................................... 21,037,571 ============= Net asset value and redemption price per share ........................................... $ 10.99 ============= Offering price per share (100/96 of $10.99 adjusted to nearest cent) ..................... $ 11.45 ============= CLASS C Net Assets ............................................................................... $ 14,199,668 ============= Capital shares outstanding ............................................................... 1,294,534 ============= Net asset value and offering price per share ............................................. $ 10.97 ============= Redemption price per share (*a charge of 1% is imposed on the redemption proceeds of the shares, or on the original price, whichever is lower, if redeemed during the first 12 months after purchase) .......................................... $ 10.97* ============= CLASS I Net Assets ............................................................................... $ 5,118 ============= Capital shares outstanding ............................................................... 466 ============= Net asset value, offering and redemption price per share ................................. $ 10.99 ============= CLASS Y Net Assets ............................................................................... $ 9,630,023 ============= Capital shares outstanding ............................................................... 874,368 ============= Net asset value, offering and redemption price per share ................................. $ 11.01 =============
See accompanying notes to financial statements. TAX-FREE FUND OF COLORADO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) INVESTMENT INCOME: Interest income ............................................ $ 5,487,428 Expenses: Management fee (note 3) .................................... $ 600,725 Distribution and service fees (note 3) ..................... 112,343 Transfer and shareholder servicing agent fees .............. 60,925 Trustees' fees and expenses (note 8) ....................... 40,771 Shareholders' reports and proxy statements ................. 31,983 Legal fees ................................................. 27,966 Auditing fees .............................................. 14,079 Custodian fees ............................................. 13,528 Registration fees and dues ................................. 8,040 Miscellaneous .............................................. 23,820 ----------- Total expenses ............................................. 934,180 Expenses paid indirectly (note 6) .......................... (5,803) ----------- Net expenses ............................................... 928,377 ----------- Net investment income ...................................... 4,559,051 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions ...... 59,960 Change in unrealized appreciation on investments ........... 4,073,893 ----------- Net realized and unrealized gain (loss) on investments ..... 4,133,853 ----------- Net change in net assets resulting from operations ......... $ 8,692,904 ===========
See accompanying notes to financial statements. TAX-FREE FUND OF COLORADO STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- OPERATIONS: Net investment income ......................................... $ 4,559,051 $ 8,460,610 Net realized gain (loss) from securities transactions ......... 59,960 156,615 Change in unrealized appreciation on investments .............. 4,073,893 10,045,867 ------------- ------------- Change in net assets from operations ....................... 8,692,904 18,663,092 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10): Class A Shares: Net investment income ......................................... (4,462,502) (8,388,584) Class C Shares: Net investment income ......................................... (175,962) (161,987) Class I Shares: Net investment income ......................................... (46)+ -- Class Y Shares: Net investment income ......................................... (176,945) (276,796) ------------- ------------- Change in net assets from distributions .................... (4,815,455) (8,827,367) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold ..................................... 26,628,134 45,269,037 Reinvested dividends and distributions ........................ 2,848,472 5,281,641 Cost of shares redeemed ....................................... (10,093,813) (21,843,527) ------------- ------------- Change in net assets from capital share transactions .......... 19,382,793 28,707,151 ------------- ------------- Change in net assets ....................................... 23,260,242 38,542,876 NET ASSETS: Beginning of period ........................................... 231,785,910 193,243,034 ------------- ------------- End of period* ................................................ $ 255,046,152 $ 231,785,910 ============= ============= * Includes undistributed (overdistributed) net investment income of: $ (244,934) $ 11,470 ============= =============
---------- + For the period April 2, 2003 to June 30, 2003. See accompanying notes to financial statements. TAX-FREE FUND OF COLORADO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Tax-Free Fund of Colorado (the "Fund"), a non-diversified, open-end investment company, was organized in February, 1987 as a Massachusetts business trust and commenced operations on May 21, 1987. The Fund is authorized to issue an unlimited number of shares and, since its inception to April 30, 1996, offered only one class of shares. On that date, the Fund began offering two additional classes of shares, Class C and Class Y shares. All shares outstanding prior to that date were designated as Class A shares and are sold with a front-payment sales charge and bear an annual distribution fee. Class C shares are sold with a level-payment sales charge with no payment at time of purchase but level service and distribution fees from date of purchase through a period of six years thereafter. A contingent deferred sales charge of 1% is assessed to any Class C shareholder who redeems shares of this Class within one year from the date of purchase. Class C Shares, together with a pro-rata portion of all Class C Shares acquired through reinvestment of dividends and other distributions paid in additional Class C Shares, automatically convert to Class A Shares after 6 years. The Class Y shares are only offered to institutions acting for an investor in a fiduciary, advisory, agency, custodian or similar capacity and are not offered directly to retail investors. Class Y shares are sold at net asset value without any sales charge, redemption fees, contingent deferred sales charge or distribution or service fees. On April 30, 1998, the Fund established Class I shares, which are offered and sold only through financial intermediaries and are not offered directly to retail investors. Class I Shares are sold at net asset value without any sales charge, redemption fees, or contingent deferred sales charge. Class I Shares carry a distribution and service fee. All classes of shares represent interests in the same portfolio of investments and are identical as to rights and privileges but differ with respect to the effect of sales charges, the distribution and/or service fees borne by each class, expenses specific to each class, voting rights on matters affecting a single class and the exchange privileges of each class. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities of more than 60 days are valued at fair value each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services; in the case of securities for which market quotations are readily available, securities are valued at the mean of bid and asked quotations and, in the case of other securities, at fair value determined under procedures established by and under the general supervision of the Board of Trustees. Securities which mature in 60 days or less are valued at amortized cost if their term to maturity at purchase is 60 days or less, or by amortizing their unrealized appreciation or depreciation on the 61st day prior to maturity, if their term to maturity at purchase exceeds 60 days. b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities transactions are recorded on the trade date. Realized gains and losses from securities transactions are reported on the identified cost basis. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. c) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a regulated investment company by complying with the provisions of the Internal Revenue Code applicable to certain investment companies. The Fund intends to make distributions of income and securities profits sufficient to relieve it from all, or substantially all, Federal income and excise taxes. d) ALLOCATION OF EXPENSES: Expenses, other than class-specific expenses, are allocated daily to each class of shares based on the relative net assets of each class. Class-specific expenses, which include distribution and service fees and any other items that are specifically attributed to a particular class, are charged directly to such class. e) USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 3. FEES AND RELATED PARTY TRANSACTIONS a) MANAGEMENT ARRANGEMENTS: Aquila Management Corporation (the "Manager"), the Fund's founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. The portfolio management of the Fund has been delegated to a Sub-Adviser as described below. Under the Advisory and Administration Agreement, the Manager provides all administrative services to the Fund, other than those relating to the day-to-day portfolio management. The Manager's services include providing the office of the Fund and all related services as well as overseeing the activities of the Sub-Adviser and all the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, auditors and distributor and additionally maintaining the Fund's accounting books and records. For its services, the Manager is entitled to receive a fee which is payable monthly and computed as of the close of business each day at the annual rate of 0.50% on the Fund's net assets. KPM Investment Management, Inc. (the "Sub-Adviser"), a wholly-owned subsidiary of KFS Corporation, a member of the nationally oriented Mutual of Omaha Companies, serves as the Investment Sub-Adviser for the Fund under a Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser continuously provides, subject to oversight of the Manager and the Board of Trustees of the Fund, the investment program of the Fund and the composition of its portfolio, arranges for the purchases and sales of portfolio securities, and provides for daily pricing of the Fund's portfolio. For its services, the Sub-Adviser is entitled to receive a fee from the Manager which is payable monthly and computed as of the close of business each day at the annual rate of 0.20 of 1% on the Fund's average net assets. Specific details as to the effect of the Fund's payments under its Distribution Plan, as described below, on the above management fees and as to the nature and extent of the services provided by the Manager and the Sub-Adviser are more fully defined in the Fund's Prospectus and Statement of Additional Information. b) DISTRIBUTION AND SERVICE FEES: The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of the Plan, with respect to Class A Shares, the Fund is authorized to make service fee payments to broker-dealers or others ("Qualified Recipients") selected by Aquila Distributors, Inc. (the "Distributor"), including, but not limited to, any principal underwriter of the Fund, with which the Distributor has entered into written agreements contemplated by the Rule and which have rendered assistance in the distribution and/or retention of the Fund's shares or servicing of shareholder accounts. The Fund currently makes payment of this distribution fee at the annual rate of 0.05% of the Fund's average net assets represented by Class A Shares. The Board of Trustees and shareholders approved an amendment to the Fund's Distribution Plan applicable to Class A Shares which will permit the Fund to make service fee payments at the rate of up to 0.15 of 1% on the entire net assets represented by Class A Shares. For the six months ended June 30, 2003, service fees on Class A Shares amounted to $55,046 of which the Distributor retained $2,190. Under another part of the Plan, the Fund is authorized to make payments with respect to Class C Shares to Qualified Recipients which have rendered assistance in the distribution and/or retention of the Fund's Class C shares or servicing of shareholder accounts. These payments are made at the annual rate of 0.75% of the Fund's average net assets represented by Class C Shares and for the six months ended June 30, 2003, amounted to $42,971. In addition, under a Shareholder Services Plan, the Fund is authorized to make service fee payments with respect to Class C Shares to Qualified Recipients for providing personal services and/or maintenance of shareholder accounts. These payments are made at the annual rate of 0.25% of the Fund's average net assets represented by Class C Shares and for the six months ended June 30, 2003 amounted to $14,323. The total of these payments with respect to Class C Shares amounted to $57,294 of which the Distributor retained $6,015. Under another part of the Plan, the Fund is authorized to make payments with respect to Class I Shares to Qualified Recipients. Class I payments, under the Plan, may not exceed for any fiscal year of the Fund a rate (currently 0.25%), set from time to time by the Board of Trustees, of not more than 0.25% of the average annual net assets represented by the Class I Shares. In addition, Class I has a Shareholder Services Plan under which it may pay service fees (currently 0.15%) of not more than 0.25% of the average annual net assets represented by Class I Shares. That is, the total payments under both plans will not exceed 0.50% of such net assets. For the period April 2, 2003 through June 30, 2003, these payments were made at the average annual rate of 0.40% of such net assets and amounted to $5 of which $3 related to the Plan and $2 related to the Shareholder Services Plan. Specific details about the Plans are more fully defined in the Fund's Prospectus and Statement of Additional Information. Under a Distribution Agreement, the Distributor serves as the exclusive distributor of the Fund's shares. Through agreements between the Distributor and various broker-dealer firms ("dealers"), the Fund's shares are sold primarily through the facilities of these dealers having offices within Colorado, with the bulk of sales commissions inuring to such dealers. For the six months ended June 30, 2003, total commissions on sales of Class AShares amounted to $442,872 of which the Distributor received $53,123. c) OTHER RELATED PARTY TRANSACTIONS: For the six months ended June 30, 2003, the Fund incurred $27,625 of legal fees allocable to Hollyer Brady Smith & Hines LLP, counsel to the Fund, for legal services in conjunction with the Fund's ongoing operations. The Secretary of the Fund is a Partner of Hollyer Brady Smith & Hines LLP. 4. PURCHASES AND SALES OF SECURITIES During the six months ended June 30, 2003, purchases of securities and proceeds from the sales of securities aggregated $28,159,962 and $5,995,885, respectively. At June 30, 2003, the aggregate tax cost for all securities was $234,661,499. At June 30, 2003 the aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $20,420,611 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $138,074 for a net unrealized appreciation of $20,282,537. 5. PORTFOLIO ORIENTATION Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Colorado, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Colorado and whatever effects these may have upon Colorado issuers' ability to meet their obligations. 6. EXPENSES The Fund has negotiated an expense offset arrangement with its custodian wherein it receives credit toward the reduction of custodian fees and other Fund expenses whenever there are uninvested cash balances. The Statement of Operations reflects the total expenses before any offset, the amount of offset and the net expenses. It is the general intention of the Fund to invest, to the extent practicable, some or all of cash balances in income-producing assets rather than leave cash on deposit. 7. CAPITAL SHARE TRANSACTIONS Transactions in Capital Shares of the Fund were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ----------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ CLASS A SHARES: Proceeds from shares sold .... 1,666,093 $ 18,182,545 2,861,228 $ 30,423,801 Reinvested distributions ..... 250,499 2,726,261 486,558 5,156,250 Cost of shares redeemed ...... (774,374) (8,429,520) (1,582,400) (16,725,358) ------------ ------------ ------------ ------------ Net change ................ 1,142,218 12,479,286 1,765,386 18,854,693 ------------ ------------ ------------ ------------ CLASS C SHARES: Proceeds from shares sold .... 497,386 5,406,367 696,460 7,376,485 Reinvested distributions ..... 9,973 108,462 10,218 108,404 Cost of shares redeemed ...... (56,589) (615,426) (48,328) (514,095) ------------ ------------ ------------ ------------ Net change ................ 450,770 4,899,403 658,350 6,970,794 ------------ ------------ ------------ ------------ CLASS I SHARES: Proceeds from shares sold .... 463 5,000 -- -- Reinvested distributions ..... 3 31 -- -- Cost of shares redeemed ...... -- -- -- -- ------------ ------------ ------------ ------------ Net change ................ 466* 5,031* -- -- ------------ ------------ ------------ ------------ CLASS Y SHARES: Proceeds from shares sold .... 279,056 3,034,222 701,513 7,468,751 Reinvested distributions ..... 1,257 13,718 1,591 16,987 Cost of shares redeemed ...... (96,254) (1,048,867) (430,013) (4,604,074) ------------ ------------ ------------ ------------ Net change ................ 184,059 1,999,073 273,091 2,881,664 ------------ ------------ ------------ ------------ Total transactions in Fund shares ........................... 1,777,513 $ 19,382,793 2,696,827 $ 28,707,151 ============ ============ ============ ============
* For the period April 2, 2003 to June 30, 2003. 8. TRUSTEES' FEES AND EXPENSES During the prior fiscal year there were seven Trustees, two of whom are affiliated with the Manager and are not paid any trustee fees. Each Trustee's fees paid during the year were at the annual rate of $7,100 for carrying out their responsibilities and attendance at regularly scheduled Board Meetings. A meeting of the independent trustees is held prior to each quarterly Board Meeting for which each attendee is paid a fee of $100. If additional or special meetings are scheduled for the Fund, separate meeting fees are paid for each such meeting to those Trustees in attendance. The Fund also reimburses the Trustees for expenses such as travel, accomodations, and meals incurred in connection with attendance at regularly scheduled or special Board Meetings and at the Annual Meeting and outreach meetings of Shareholders. For the fiscal year ended December 31, 2002 such reimbursements averaged approximately $5,600 per Trustee. 9. SECURITIES TRADED ON A WHEN-ISSUED BASIS The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the amount of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. 10. DISTRIBUTIONS The Fund declares dividends daily from net investment income and makes payments monthly in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder's option. Net realized capital gains, if any, are distributed annually and are taxable. The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Colorado income taxes. However, due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund's net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income and/or capital gain rates. For certain shareholders, some dividend income may, under some circumstances, be subject to the alternative minimum tax. TAX-FREE FUND OF COLORADO FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A CLASS I ------------------------------------------------------------------ ----------- SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED 06/30/03 -------------------------------------------------- 06/30/03(1) (UNAUDITED) 2002 2001 2000 1999 1998 (UNAUDITED) ----------- ------ ------ ------ ------ ------ ----------- Net asset value, beginning of period .......... $10.82 $10.32 $10.31 $9.98 $10.63 $10.62 $10.80 ------ ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income+ ..................... 0.21 0.43 0.45 0.46 0.46 0.47 0.21 Net gain (loss) on securities (both realized and unrealized) ................ 0.18 0.52 0.02 0.35 (0.55) 0.04 0.08 ------ ------ ------ ------ ------ ------ ------ Total from investment operations ........... 0.39 0.95 0.47 0.81 (0.09) 0.51 0.29 ------ ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ....... (0.22) (0.45) (0.46) (0.48) (0.48) (0.46) (0.10) Distributions from capital gains ........... - - - - (0.08) (0.04) - ------ ------ ------ ------ ------ ------ ------ Total distributions ........................... (0.22) (0.45) (0.46) (0.48) (0.56) (0.50) (0.10) ------ ------ ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.99 $10.82 $10.32 $10.31 $9.98 $10.63 $10.99 ====== ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 3.63%++ 9.36% 4.64% 8.30% (0.84)% 4.92% 2.68%++ Ratios/supplemental data Net assets, end of period (in thousands) ........................... $231,211 $215,195 $187,022 $179,816 $190,698 $208,771 $5 Ratio of expenses to average net assets ............................... 0.73%* 0.75% 0.76% 0.78% 0.76% 0.75% 1.01%* Ratio of net investment income to average net assets ....................... 3.84%* 4.05% 4.27% 4.53% 4.41% 4.47% 3.39%* Portfolio turnover rate .................... 2.50%++ 6.95% 14.56% 22.45% 13.08% 15.20% 2.50%++ The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets ........................... 0.73%* 0.74% 0.75% 0.77% 0.75% 0.73% 1.00%*
---------- (1) For the period April 2, 2003 to June 30, 2003. + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized. * Annualized. See accompanying notes to financial statements. TAX-FREE FUND OF COLORADO FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C SIX MONTHS -------------------------------------------------- ENDED YEAR ENDED DECEMBER 31, 06/30/03 -------------------------------------------------- (UNAUDITED) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period .............. $10.80 $10.30 $10.29 $9.97 $10.61 $10.60 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income+ ......................... 0.15 0.31 0.34 0.37 0.36 0.37 Net gain (loss) on securities (both realized and unrealized) .................... 0.19 0.53 0.03 0.33 (0.54) 0.04 ------ ------ ------ ------ ------ ------ Total from investment operations ............... 0.34 0.84 0.37 0.70 (0.18) 0.41 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ........... (0.17) (0.34) (0.36) (0.38) (0.38) (0.36) Distributions from capital gains ............... - - - - (0.08) (0.04) ------ ------ ------ ------ ------ ------ Total distributions ............................ (0.17) (0.34) (0.36) (0.38) (0.46) (0.40) ------ ------ ------ ------ ------ ------ Net asset value, end of period .................... $10.97 $10.80 $10.30 $10.29 $9.97 $10.61 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ........ 3.15%++ 8.32% 3.64% 7.18% (1.70)% 3.92% Ratios/supplemental data Net assets, end of period (in thousands) ....... $14,200 $9,109 $1,909 $897 $1,932 $1,328 Ratio of expenses to average net assets ........ 1.68%* 1.68% 1.69% 1.73% 1.70% 1.69% Ratio of net investment income to average net assets .......................... 2.85%* 2.99% 3.25% 3.60% 3.44% 3.50% Portfolio turnover rate ........................ 2.50%++ 6.95% 14.56% 22.45% 13.08% 15.20% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets ........ 1.68%* 1.67% 1.68% 1.72% 1.69% 1.68%
CLASS Y SIX MONTHS -------------------------------------------------- ENDED YEAR ENDED DECEMBER 31, 06/30/03 -------------------------------------------------- (UNAUDITED) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period .............. $10.84 $10.33 $10.33 $10.00 $10.65 $10.64 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income+ ......................... 0.21 0.44 0.45 0.46 0.46 0.48 Net gain (loss) on securities (both realized and unrealized) ..................... 0.18 0.52 0.02 0.35 (0.54) 0.04 ------ ------ ------ ------ ------ ------ Total from investment operations ............... 0.39 0.96 0.47 0.81 (0.08) 0.52 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ........... (0.22) (0.45) (0.47) (0.48) (0.49) (0.47) Distributions from capital gains ............... - - - - (0.08) (0.04) ------ ------ ------ ------ ------ ------ Total distributions ............................ (0.22) (0.45) (0.47) (0.48) (0.57) (0.51) ------ ------ ------ ------ ------ ------ Net asset value, end of period .................... $11.01 $10.84 $10.33 $10.33 $10.00 $10.65 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ........ 3.65%++ 9.50% 4.59% 8.36% (0.79)% 4.97% Ratios/supplemental data Net assets, end of period (in thousands) ....... $9,630 $7,482 $4,312 $4,417 $5,416 $7,047 Ratio of expenses to average net assets ........ 0.68%* 0.69% 0.71% 0.73% 0.71% 0.69% Ratio of net investment income to average net assets ........................... 3.87%* 4.07% 4.32% 4.58% 4.45% 4.50% Portfolio turnover rate ........................ 2.50%++ 6.95% 14.56% 22.45% 13.08% 15.20% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets ........ 0.68%* 0.69% 0.70% 0.72% 0.70% 0.68%
---------- + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized. * Annualized. See accompanying notes to financial statements. SHAREHOLDER MEETING RESULTS (UNAUDITED) The Annual Meeting of Shareholders of Tax-Free Fund for Colorado (the "Fund") was held on June 23, 2003. The holders of shares representing 81% of the total net asset value of the shares entitled to vote were present in person or by proxy. At the meeting, the following matters were voted upon and approved by the shareholders (the resulting votes are presented below). 1. To elect Trustees. Number of Votes: TRUSTEE FOR WITHHELD ------- --- -------- Lacy B. Herrmann 17,772,961 285,205 Tucker Hart Adams 17,926,756 131,410 Gary C. Cornia 17,938,723 119,443 Diana P. Herrmann 17,765,429 292,738 John C. Lucking 17,955,546 102,620 Anne J. Mills 17,942,240 115,927 J. William Weeks 17,931,408 126,758 2. To ratify the selection of KPMG LLP as the Fund's independent auditors. Number of Votes: FOR AGAINST ABSTAIN --- ------- ------- 17,833,204 78,047 146,914 MANAGER AND FOUNDER AQUILA MANAGEMENT CORPORATION 380 Madison Avenue, Suite 2300 New York, New York 10017 INVESTMENT SUB-ADVISER KPM INVESTMENT MANAGEMENT, INC. 1600 Broadway, Suite 1100 Denver, Colorado 80202 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Tucker Hart Adams Gary C. Cornia Diana P. Herrmann John C. Lucking Anne J. Mills J. William Weeks OFFICERS Diana P. Herrmann, President James M. McCullough, Senior Vice President Emily T. Rae, Vice President Joseph P. DiMaggio, Chief Financial Officer and Treasurer Edward M.W. Hines, Secretary DISTRIBUTOR AQUILA DISTRIBUTORS, INC. 380 Madison Avenue, Suite 2300 New York, New York 10017 CUSTODIAN BANK ONE TRUST COMPANY, N.A. 1111 Polaris Parkway Columbus, Ohio 43240 TRANSFER AND SHAREHOLDER SERVICING AGENT PFPC Inc. 400 Bellevue Parkway Wilmington, Delaware 19809 INDEPENDENT AUDITORS KPMG LLP 757 Third Avenue New York, New York 10017 Further information is contained in the Prospectus, which must precede or accompany this report. SEMI-ANNUAL REPORT JUNE 30, 2003 [Logo of Tax-Free Fund of Colorado: a square with silhouettes of two mountains and a rising sun] TAX-FREE FUND OF COLORADO A TAX-FREE INCOME INVESTMENT [Logo of the Aquila Group of Funds: an eagle's head] ONE OF THE AQUILA(SM) GROUP OF FUNDS ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. 905: Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) as of a date within 90 days of the fling of this report, the registrant's chief financial and executive officers have concluded that the disclosure controls and procedures of the registrant are appropriately designed to ensure that information required to be disclosed in the registrant's reports that are filed under the Securities Exchange Act of 1934 are accumulated and communicated to registrant's management, including its principal executive officer(s) and principal financial officer(s), to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TAX-FREE FUND OF COLORADO By: /s/ Lacy B. Herrmann --------------------------------- Chairman of the Board September 8, 2003 By: /s/ Diana P. Herrmann --------------------------------- President September 8, 2003 By: /s/ Joseph P. DiMaggio ----------------------------------- Chief Financial Officer September 8, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Lacy B. Herrmann --------------------------------- Lacy B. Herrmann Chairman of the Board September 8, 2003 By: /s/ Diana P. Herrmann --------------------------------- Diana P. Herrmann President September 8, 2003 By: /s/ Joseph P. DiMaggio ----------------------------------- Joseph P. DiMaggio Chief Financial Officer September 8, 2003 TAX-FREE FUND OF COLORADO EXHIBIT INDEX (a) (2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940.